ARLINGTON, Va. – NASCUS sent its comment letter to the Financial Accounting Standards Board concerning FASB's proposed revisions to FASB 140, Accounting for Transfers of Financial Assets. NASCUS stated that FASB's revisions to the Aug. 11, 2005 Exposure Draft address the association's concerns about participating loan interests. "The purpose of this letter is to note our understanding of changes to the provisions in the latest Exposure Draft of FASB 140," wrote NASCUS EVP, Government Relations Sandra Troutman. Her letter focused on two provisions in FASB 140 that concern "Defining a Participating Interest" and "Requirements for Surrender of Control of Transferred Loan Participations." Noting that the proposed revisions to the definition of a "participating interest" provide practical provisions for credit unions who solely engage in individual loan participations, Troutman wrote that, "NASCUS is pleased that the language changes in this amendment define a "Participating Interest" and that the revisions to FASB 140 provide that transfers which meet the above provisions can qualify for sale treatment. As NASCUS noted in a previous comment letter, most credit unions engage solely in individual loan participations, and it is not practicable or cost efficient for a credit union to obtain a Qualified Special Purpose Entity (QSPE) status for loans which are non-complex loan participations." Troutman continued to state that, "The addition of Paragraph 8A in the August 11, 2005 Exposure Draft defines how transfers of assets, groups of assets or participating interests in assets are to be handled under FASB 140. It defines how to accord sale treatment for participations and should result in sufficient flexibility to credit unions, provided that participations are properly structured in accordance with these provisions. This is an important improvement to Statement 140 for credit unions that use loan participations as a tool to diversify risk." Regarding "Requirements for Surrender of Control of Transferred Loan Participations," as addressed in Paragraph 9, Troutman stated that, "NASCUS supports the changes to the language of Paragraph 9 of FASB Rule 140." Paragraph 9, she wrote, "has been amended to explicitly state when a transferor has surrendered control over transferred financial assets." "We believe this language provides reasonable assurance of when a financial asset qualifies as a loan sale. It also provides more latitude for credit unions when using loan participations as a tool to diversify risk," she continued. In closing, she wrote that, "State-credit union regulators will play an important role educating and informing credit unions using loan participations of the provisions in FASB Rule 140. We believe state regulators can serve as an effective conduit, helping to ensure that credit unions understand the requirements." -

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